What effect has inheriting money on economic inequality in Norway and has it changed over time?

This is what Alnæs wanted to inspect.

In his thesis, Liberty, Equality, Inheritance? An empirical study of inheritance’s impact on wealth inequality in Norway, he has looked at wealth-development using microdata from SSB (Statistics Norway) between 1994-2013.

Now the work has been honored with the award, “best master's thesis”, at the department. In their assessment the committee writes as follows: 

"The committee is impressed by the careful use of data and methods, which are explained in a clear and logical way. The thesis also shows its practical value by discussing how these findings can inform public policy on economic inequality" (see facts for the full assessment).

‘It was very nice to receive recognition for the countless  hours of work, drops of sweat and jugs of coffee that went along with the process, says the 26-year-old.

Surprising findings

For the former NHH student, it was important to write a relevant master's thesis within the field of social economics.

During his studies, he became particularly interested in econometrics and microeconomics and sought out Maximilian Todtenhaupt as a supervisor. Together they developed the research question inspired by a similar study from Sweden.

‘I found that if you use a relative measure of inequality such as the Gini coefficient (the most widely used measure of the distribution of economic resources), inheritance actually had a leveling effect. But at the same time I found that absolute inequality in turn increases as a result of inheritance, says Alnæs and continues:

‘This is an apparent paradox. But the explanation is that even though the rich heirs inherit more money, they actually inherit less relative to their original net worth, compared to the less wealthy heirs.’

This surprised him, but it was also the same tendencies Elinder, Erixson and Waldenström found in their Swedish study from 2018: Inheritance and wealth inequality: Evidence from population register.

‘My data set was constructed very differently from the Swedish one, so that much of the work on the thesis revolved around both processing the data set so that the results could be comparable, and later criticizing and discussing my own results in light of the differences between the studies’, explains Alnæs.

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A complex topic

He also saw, in contrast to the Swedish study, how the effects have changed over time:

‘I found signs that the effect of inheritance seems to have become more inequality-driving during the years I studied, regardless of which inequality measure is used as a basis. It may also seem reasonable when we know that economic inequality in Norway has increased in recent decades’.

Alnæs says he learned a great deal about how difficult research on such a complex topic as heritage can be.

‘It all becomes very nuanced when you first start digging into it, and you must constantly be open to the fact that the intuitions you have may turn out to be wrong’, he says and elaborates:

‘Although family background is significant, it does not have to imply that it is the financial transfer through inheritance that is most important. Which qualities you inherit from your parents, which skills and habits you are taught, which network your family has or where and how you grew up, may perhaps be equally important.

Alnæs emphasizes that the study concerns Norwegian conditions, and that in other countries or with other variables, a different result may be found. 

‘You have to be open to the fact that the results you find may be completely wrong. The only thing that reassured me a little was that I could confirm the tendencies from the Swedish, far more professional study’, he says.

Patient partner

Alnæs lived in Paris while writing his master's thesis and found it to be an exciting and educational few months.

‘The input and guidence from Maximilian was very useful, and I always got answers to the difficult questions I had written down’, he says.

After an intense six months, he will return to his job as senior consultant in the Ministry of Finance in Norway. Here he works with socio-economic assessments related to the national budget.

He also wants to thank his patient partner and will share the prize money with him:

‘There were many intense days and the task sometimes became an all-consuming project. This was probably noticed by my partner, who had to put up with me through a long autumn in Paris. So it cost quite a bit, but I believe and hope it was worth the effort. Among other things, we will use the prize money on a trip to Japan’, he says.

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